Key Points
MP Materials is a beneficiary of government involvement.
The rare earth sector received a rerating in April.
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Shares in rare earth company MP Materials (NYSE: MP) rose by 36.8% in April, according to data from S&P Global Market Intelligence. The move due to a series of events rather than a one-off catalyst. The interesting thing is that they all highlight the long-term case for buying the stock.
A sector wide rerating
First, as readers already know, the company's rare-earth peer, USA Rare Earth (NASDAQ: USAR), rose 72% in April on the back of derisking its business model through ensuring it had an adequate supply of rare-earth elements and oxides before it commissions its own rare-earth mining operation, Round Top, in 2028.
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The significant rerating of a peer reads well for MP Materials, particularly as, unlike USA Rare Earth, it already has rare-earth mining operations in place and is expanding magnet-producing capability, including the construction of its 10X facility.
Indeed, the benefit of MP Materials' vertically integrated business supported the outperform rating and $90 price target slapped on the stock by the initiation of coverage by Wedbush Securities.
Ongoing trade tensions
Second, a key part of the bullish case for the stock is the ongoing trade and political tensions between the U.S. and China, the dominant global player in rare-earth Metals. Any ratcheting of tensions raises concerns that China might strengthen rare-earth export controls, and the reality is that China has leverage on the issue.
For example, the implementation of export controls announced in China's Ministry of Commerce Notice 2025 No. 61 is currently postponed until mid November. The notice states that items "manufactured in foreign countries, and that contain, integrate, or have mixed in with them any rare-earth" produced in China "such that the value of said rare-earth comprises 0.1% or more of the item, will require a "dual-use item export permit."
If tensions lead to its implementation in November, it will further underscore the U.S. need for a domestic supply of rare-earth materials, metals, and magnets.
Image source: Getty Images.
Price protection agreement benefit
Third, investors continue to see the price protection agreement (PPA) made with the U.S. government (as part of a broader deal made last year) start to significantly impact the company's financial results.
The PPA with the Department of Defense sets a floor for the company's Neodymium-Praseodymium (NdPr) products of $110 per kg for the next 10 years. As such, it generated $51 million in income in the fourth quarter of 2025, resulting in adjusted net income of $18.3 million. Moreover, there was a benefit of $42.3 million in the first quarter, resulting in an adjusted net income of $6.6 million.
Image source: Getty Images.
Where next for MP Materials
The strategic importance of MP Materials is undeniable, but so is the sense that the PPA is an unusual arrangement that carries political risk. However, for now, the market appears comfortable with that long-term risk, and MP Materials continues to offer a solution to the problem of securing a domestic supply of rare-earth materials and magnets.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
